Policy Brief

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Regulating and mobilising the private sector for democracy protection in the European Union’s trade policy

Sinanoglu, Semuhi / Niels Keijzer
Policy Brief (26/2026)

Bonn: German Institute of Development and Sustainability (IDOS)

DOI: https://doi.org/10.23661/ipb26.2026

The European Union (EU) conditions access to its market on compliance with human rights, labour standards, and environmental policy and regulation. Its trade-related legislation falls into two categories: measures addressing partner governments and measures targeting the private sector. Within these two groups, only the first includes an instrument that specifically mentions democracy, namely the essential elements clause, which appears frequently in EU trade agreements yet has been invoked only once since 2014.
The EU is under domestic political pressure to deregulate in order to strengthen its competitiveness. The competitiveness agenda is cutting into the instruments the EU already has, especially amid geopolitical competition with China, making suspensionled conditionality against partner governments harder to enact. Our recommendations are as follows:

• Democracy protection stakeholders should shift their attention from suspension-led demo¬cracy support and conditionality aimed at partner governments towards the rules and incentives that run through the private sector. Even after the Omnibus reform’s narrowing scope, firm-facing rules remain in place. They are default-on and run through existing regulatory arrangements, and their potential geopolitical repercussions are smaller in comparison.
• Tender processes are one particular set of firm-facing rules. With the momentum behind the European Commission’s legislative proposal to revise the public procurement directive, corruption-based exclusion rules should be applied against operators linked to state capture in partner countries, as democratic backsliders often use public procurement to consolidate patronage networks.
• Firm-facing regulations also permit a different case to be made: stronger due diligence carries no measurable competitiveness penalty. Companies are not just subjects of regulation. They are also stakeholders with their own interest in transparent procurement and predictable rules. To bolster such a narrative, development cooperation should invest in developing compliance capacity, especially in autocratising states.
 

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